At a time when Infrastructure Leasing and Financial Services (IL&FS) is struggling with huge debts, Ramesh Bawa, the MD and CEO of its financial services unit IL&FS Financial Services has resigned, effective immediately. Bawa's resignation comes just days after IL&FS Financial Services had defaulted on payments on its commercial papers.
"This is to inform you that Ramesh Bawa, MD and CEO of the company has tendered his resignation with effect from September 21, 2018," the company said in a statement to stock exchanges, without elaborating further.
IL&FS Financial Services had disclosed on September 6 that the commercial papers (CP), which were due on August 28, could not be paid on due date and were settled in full on August 31. Earlier this week, the company further said that its CP due on September 14 could not be serviced in full on due date and were subsequently settled on September 15. The CP dated September 18 could also not be serviced.
In the wake of these defaults and the huge debt, IL&FS, which is among the largest companies in the infrastructure development and finance space in the country, has seen several credit ratings agencies downgrading their ratings on the company's various debt instruments.
Earlier this week, ICRA as well as CARE Ratings had downgraded the various borrowing programmes of IL&FS. CARE Ratings recently revised its ratings on non-convertible debentures of IL&FS amounting to Rs 9,641 crore to D or default grade from BB and on CP amounting to Rs 2,500 crore to D from A4. Ratings on other debt instruments of IL&FS were also revised to D.
ICRA too downgraded IL&FS' non-convertible debenture programme amounting to Rs 5,225 crore, commercial paper programme amounting to Rs 2,500 crore and long-term loans worth Rs 350 crore to D from BB.
"The rating revision takes into account the recent irregularities in debt servicing by the company. The liquidity position at a group level remains under challenge given the delays in raising funds from the promoters in accordance with the earlier stated plans, deterioration in the credit profile of key investee companies and sizeable debt repayment obligations," ICRA said.
To shore up the capital of IL&FS, the company's board on August 29, approved a rights issue aggregating to Rs 4,500 crore, which it says would be completed by October 30, 2018. It also has plans to cut debt by Rs 30,000 crore, and has identified 25 projects for sale. The board had also approved capitalisation of group companies—IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment and IL&FS Education—to the tune of Rs 5,000 crore.
However, ratings agencies say the delays in asset sales and fund raising are hurting.
"The deleveraging has taken longer than expected time, while uncertainty about the timely infusion of funds vis-a-vis impending debt payment obligations in the near term has severely impacted the liquidity profile of the company," said CARE.